Take this moment as a wake-up call to pay attention to what is going on with your personal finances. News stories about financial markets often have an overly-emphasized focus on various wiggles in the stock market. Additionally, many of those news stories intentionally over-complicate the role of personal finance in our day-to-day lives. However, the reality is that personal financial decisions that you make in your teens and 20's will likely have a lasting impact much deeper into the rest of your life than you may realize at this time. It is so critical to begin investing as soon as possible.
1. Developing an Investing Habit
Young people are increasingly aware of investing and the impact that it can have on their financial future. This is a beautiful and wholesome thing. It means that there are more people than ever who have the ability to potentially grow their wealth and contribute to society in ways that they might not otherwise be able to. This has even led to some popular new Internet trends related to young people and investing. Consider this observation from trendsactive.com:
A combination of factors seems to drive young people to take up investing; low-interest rates on savings, spare money laying around after a year of lockdowns and an increasing hype on non-traditional platforms like Reddit and TikTok. The trend "#investing" has amassed over 2 billion views on TikTok as more and more young people are turning to the platform to learn about the stock market.
This perfect brew of factors has made the Millennial and Gen Z generations some of the first in a long time to take investing seriously. To be fair, websites such as StockTok should be taken far less seriously than actual professional financial reports and news produced by qualified individuals, but sometimes a little sugar does help the medicine go down. It is nice to see that young people are so engaged and so excited by the markets that they are willing to spend some of their free time conversing with one another about those markets. This can help younger people start to develop a taste for markets and their awesome power to change the world.
2. The Importance of Compound Interest
There literally is no time like the present to start investing in the stock market. This is not a prediction about the prices reflected in the market at this time and how they might move into the future. Rather, this is a statement about the role and impact of compound interest on one's investment portfolio.
An illustration might be useful in explaining the concept of compound interest. Imagine a snowy day with people out enjoying playing in the powdery substance. One person climbs to the top of a large hill and begins to form a snowball on the ground. They gather a small amount of snow and then push that snow off the edge of the hill.
The snow continues to accumulate as it rolls down the hill until the snowball has grown. This idea is one way to think about compound interest. One starts with a small amount of money in their investment account that they strive to grow over time. As the investment grows, it gathers compound interest that also grows. Over a long stretch of time, the small investment can grow into something much larger.
The idea is that the investor should also contribute more money to their portfolio as they earn money from their jobs. A one-time investment is very unlikely to be enough to spark a massive return. However, consistently adding to the funds over time makes it a lot easier to see big results at the end of the day. The younger you are when you begin, the more money accumulates when it's time to withdraw it.
3. Stock Market Investment Insights That Others May Miss
Young people hold an awesome power to see investing insights that might fly right by someone from another generation. This is because young people are often very locked into the trends of the day. They know and understand what is popular with their peers at this time. This is critical to success in the stock market. Indeed, the entire idea is to buy stocks when they are low-priced and then sell them after they gain value. Simply knowing what is popular or what appears ready to take off is something that Gen Z can do perhaps better than anyone else at this particular time. Thus, Gen Z should be encouraged as much as possible to get involved in stock market investing.
4. A Great Conversation Starter
Investing leads to amazingly interesting things to talk about with co-workers, friends, family, and anyone you meet. The Internet was on fire with stories from the Reddit stock talk board known as "WallStreetBets" particularly in the early months of 2021 as the so-called "meme stocks" took off in value. This subreddit generated much of the spark of interest that drove a variety of stock names higher. Posters on the board discussed their disgust for short-sellers and hedge funds, all while selecting the various companies they would like to see have a nice pop in stock value. It was an exciting and interesting time in the market. Those who were active participants could say that they were there to take part in all the fun.
Get Your Gen Zer Into the Stock Market
Only those with some working knowledge of the stock market would even have known that this conversation was ongoing. Thus, the desire for involvement in the stock market fulfills a social and financial need. It certainly becomes worthwhile to get involved with the stock market at a young age.
